It is routine to avail of an annual physical check up. The doctor asks related questions, checks on the pulse, reads laboratory reports and then maybe changes the prescription. Financial planners do the same task for calculating the financial health of individuals and prescribe remedies.

The planner makes a valuation of the good debts, the mortgages and the bad ones – the credit cards. They also pry into the savings and measure the ability of the person to respond to an emergency in finances.

Andrew Tignanelli of Financial Consulate of Hunt Valley in Maryland, said, “A lot can happen in a year – markets change, phone numbers change, beneficiaries change, tax laws change and your life changes.”

The first question that has to be answered is to know if the person’s net worth is growing. This is one of the best yardsticks for gauging financial health. This easy process allows detection of long term problems that may be ready to emerge. To calculate one has to subtract liabilities from assets. Thus even if the assets are not increasing the net worth will improve if debts are paid off. There are various tools as well as calculators available on the Web that can be of guidance. One such link is Mint.com.

Walt Mozdzer of West Des Moines, Iowa, said, One of the quickest ways to take the financial temperature of a client is to track their balance sheet from year to year. If you track the client’s net worth progression, you can quickly tell if they are saving money, living within their means and/or more likely be on track to reaching their financial goals.”

Noting a decline in net worth is not necessarily bad but one should try and find out why this has happened argued Cherly Krueger another financial planner of Chicago. He explained. “Are your assets lower because you’re spending more than you’re earning or because of an external factor like a market downturn? Are your debts increasing or decreasing?” Increasing debts are alright if it is spend on education or starting up a business. It is harmful if it is being done to keep up with the status of friends and relations.

Many experts suggest seeing to the important numbers or the rations – debt-to-income proportion, savings rate and the reserve emergency funds. Patrick Collins of Greenspring Wealth Management of Towson, Maryland said, “It begins to give us a good snapshot and longer-term trend of what is happening in their financial lives and whether changes need to be implemented. We set a target for each one of them.”

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